- European equity indices are broadly lower, as traders digest US Jan ADP employment and Q4 growth figures, in addition to earnings reports from Santander and Deutsche Bank. Italy's FTSE MIB and Spain's IBEX-35 are leading the declines, amid the rise in peripheral bond yields. Banks are broadly lower, with the exception of Deutsche Bank, while resources related firms are mostly in negative territory. US companies due to report earnings results during the morning session include Aetna, Altria, Colgate, Dow Chemical, Mastercard, Potash, Under Armour, UPS and Whirlpool

Speakers:- ECB member Constancio (Portugal) stated that the legal framework for bank supervisor was robust but must must ensure legacy asset fallout was borne by banks and countries first. Banking resolution should use minimum of public money possible- Germany's Q1 GDP seen growing by +0.2% (would avoid a technical recession)- (EU) European Banking Authority (EBA) Chairman Enria stated that it was considering new stress tests in banking sector but had no decision on when- German Parliamentary member: ECB is concerned that any instability in Cyprus banking sector could impact Greece - financial press- EU's Barnier: Not out of crisis at this time but over peak of financial crisis- EU's Ashton: Confident of meeting with Iran soon- Poland Dep Labor Min stated that Jan Unemployment Rate was seen at 14.0% (**Note Dec came in at 13.4%)- Spain PM Rajoy spokesperson refuted press report that PM Rajoy has undeclared income (**Note: Press report noted that PM Rajoy received €250K from secret funds between 1997-2008 when he was govt minister and leader of the opposition)- Ireland High Court rejected claim against promissory bank note- Germany HDE Retail Association saw 1% retail sales rise in 2013 in nominal terms- Russia Agricultural Min Fedorov commented that the Govt should lower grain import duty from the current 5% level. He also reiterated that its 2013-14 grain harvest at 95M tons with exports of at least 15M- Asian Development Bank (ADB) chief Kuroda commented that Asia could grow 6.5-6.6% in 2013. He noted that growth in US and Europe remained elusive and was cautiously optimistic that Asia would lead global growth. China might grow slightly over 8% and India should see 6.5% in its current fiscal year- S&P: Steps taken by India govt are positive, but still not comfortable enough to change India's rating outlook to stable from negative- Iran stated that it sought to increase speed of its uranium enrichment program

Currencies:- Month end trading seemed to provide an excuse for some position squaring of recent FX moves.- The EUR/USD was slightly weaker in the session despite better German unemployment figures as EUR-related crosses experienced some profit taking.- Peripheral yields began the session on a higher note with both Spain and Italy up over 10bps at one point (seemed related to Italy's FTSE MIB Index that was off sharp on Wed). Yield did calmed down a bit as the session wore on as the Italian stock exchanged steady. Bund futures were rallying and aided by the weaker German retail sales data for Dec.

***Notes/Observations***- FOMC reiterated its condition of 6.5% unemployment and repeated to buy USTs at $45B a month and MBS at $40B per month; Growth in economic activity had paused in recent months-US Senate reaches deal to vote on debt ceiling extension today and is expected to pass- German Chancellor Merkel might not have majority support from her own coalition to approve possible Cyprus aid; SPD opposition will probably vote against it- Japan Dec Industrial Production data below expectations but did rise by fastest pace in 18 months-BoE's Weale: Would not rule out further QE at some stage- Germany Dec Retail Sales come in well below expectations- Germany's Jan Unemployment data comes in better than expected with back month improvement